Significant Beneficial Ownership Rules (SBO Rules) dated 8th February, 2019

Every significant beneficial owner shall file a declaration in Form No. BEN-I to the company in which he holds the significant beneficial ownership within thirty days in case of any change in his significant beneficial ownership.

significant beneficial owner‘ in relation to a reporting company means an individual referred to in sub-section (1) of section 90, who acting alone or together, or through one or more persons or trust, possesses one or more of the following rights or entitlements in such reporting company, namely:-

Repoting Company

If any of the above is holding 10% or more in the Indian Company, then SBO Rules shall apply to such company.

Disclosure under Section 90 in regard to significant Beneficial Ownership:

Disclosure under Section 90

About the Author

CS Divya GoelAuthor Divya Goel, ACS is working as Assistant Manager- Company Secretary with Neeraj Bhagat & Co. Chartered Accountants, a Chartered Accountancy firm helping foreign companies in setting up business in India and complying with various tax laws applicable to foreign companies while establishing their business in India. Author can be reached at info@neerajbhagat.com.

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Qualification: CA in Practice
Company: Neeraj Bhagat & Co.
Location: New Delhi, New Delhi, IN
Member Since: 28 Feb 2019 | Total Posts: 17
Neeraj Bhagat & Co. is helping foreign companies in opening up of Liaison/ Branch Office in India and complying with various tax laws applicable to foreign companies while establishing a business in India. Neeraj Bhagat is the founder of Neeraj Bhagat & Co. Chartered Accountants, a Chartered View Full Profile

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42 Comments

    1. Neeraj Bhagat & Co. says:

      Percentage of only equity shares has to be taken but if the Preference shares are convertible into equity then in that case consolidated percentage shall be taken into account.

  1. Ashok says:

    If a foreign company holds 51.22% and foreign individual is holding 24.39% in an Indian company with local resident holding the balance of 24.39%, does the SBO apply here and if yes who has to do it.

    1. Neeraj Bhagat & Co. says:

      In the Instant case, the SBO rules shall apply and you have to check the shareholding pattern of foreign company holding 51.22% in an Indian Company and Form BEN 1 shall be taken accordingly.

  2. divya says:

    Company “ABC Pvt. Ltd” is being held 100 % by foreign company “PQR Inc.”.
    Foreign company “PQR Inc.” is being held 100 % by another foreign company “XYZ Inc.”
    “XYZ Inc.” further being held by 100% by another foreign company “APC Inc.” which is a publicly held company and no single individual has majority stake in “APC Inc.”
    Pls advice, who shall be SBO in this case. and in case SBO is non identifiable, still Ben-2 is to be filed?

    1. In the instant case, the ultimate holding Company i.e. APC Inc. has no individual shareholder who has majority stake in the reporting Company ABC Pvt. Ltd. Hence, Form BEN 2 is not required as there is no natural person who is the ultimate beneficiary of the shares of reporting Company.

  3. RITIKA PANPALIYA says:

    IN SPL LTD , F LTD HOLDS 23.61% , B LTD HOLDS 23.61%
    IN P LTD , SPL LTD HOLDS 11.17% AND B LTD HOLDS 11.12%
    IN F LTD , B LTD HOLDS 30.41%
    IN B LTD , G(HUF) HOLDS 20.61%.
    Kindly Advice.

    1. Neeraj Bhagat & Co. says:

      In the instant case, For SPL Ltd (reporting Company) shall obtain the form BEN 1 from the majority Individual shareholder of F Ltd., B Ltd. (the natural person who is holding more than 50% shareholder of F Ltd. and B Ltd. respectively) and form BEN 2 shall be filled accordingly.

      For B Ltd. (reporting Company), then B Ltd shall obtain the form BEN 1 from the Karta of G(HUF) and form BEN 2 shall be filled.

      For P Ltd (reporting Company), then P Ltd shall obtain form BEN 1 from the Individual shareholders holding more than 50% shares in SPL Ltd. and B Ltd. and F Ltd. respectively.

      For F Ltd (reporting Company), then F Ltd shall obtain form BEN 1 from the Individual shareholders holding more than 50% shares in B Ltd.

  4. RITIKA PANPALIYA says:

    IN SPL LTD , F LTD HOLDS 23.61% , B LTD HOLDS 23.61%
    IN P LTD , SPL LTD HOLDS 11.17% AND B LTD HOLDS 11.12%
    IN F LTD , B LTD HOLDS 30.41%
    IN B LTD , G(HUF) HOLDS 20.61%.
    Kindly Advice.

  5. Jasmeet Kaur says:

    X Ltd has issued fully convertible debentures to Y Ltd and Z Ltd (1,50,000 each). Y and Z have individual shareholders having majority shareholding in them as per section 90 and the applicable rules. In such case what would be the nature of indirect holding or exercise of right in the reporting company when BEN 1 is being given by Y and Z to X Ltd – By Virtue of shares / voting rights in shares / rights on distributable dividend or any other distribution / exercise of control / exercise of significant influence ?

    1. Neeraj Bhagat & Co. says:

      In the instant case, the nature of indirect holding or exercise of right in the reporting company when BEN 1 is being given by Y and Z to X Ltd shall be by exercise of control as such debentures are to be converted into the equity shares of the X Ltd.

    1. Neeraj Bhagat & Co. says:

      When there are only individual shareholders in the Company, No need to file Form BEN 2. Similarly, in your case form BEN 2 is not required to be filled with the concerned ROC.

  6. Nikita says:

    n the following situation please help in identifying SBO-
    ABC Private limited has 5 shareholders A holding 2.03% shares B also 2.03% C (Foreigner individual) holding 26.27% D (Foreigner individual) holding 26.33% and PTE ltd(Foreign company) holding 43.34% shares in ;PTE ltd there are 3 shareholders A holding 34 % C 33% and D 33% ..
    Kindly advice on the applicability of ben2 on the reporting company ABC Pvt.

    1. Neeraj Bhagat & Co. says:

      In the instant case, ABC Private Limited has to obtain form BEN 1 from Mr. A , Mr. C and from Mr. D respectively as they are the shareholders of ABC private Limited as well as of PTE Ltd. and ABC Pvt Ltd has to file the form BEN 2 accordingly.

  7. Nidhi Parekh says:

    Dear Madam,

    In A pvt ltd the shareholders are individuals, Company, HUF and Partnership firm – Company B holds 29%, HUF hold 10% and Firm holds 2% in A Pvt Ltd. Is A pvt ltd required to file Form BEN-2.

    1. Neeraj Bhagat & Co. says:

      In the instant case, A Pvt. Ltd is liable to file form BEN 2 to the concerned ROC and A Pvt Ltd has to obtain form BEN 1 from the majority shareholders of Company B and from the Karta of HUF.

  8. GULSHAN MANGLANI says:

    ABC PVT LTD
    HAVE 2 SHARE HOLDERS (BOTH ARE NATURAL PERSON)

    i.e
    THERE IS NO LAYERS OF INVESTMENT IN RELATION TO INVESTMENT IN ABC P LTD

    MR A HOLDS 50% OF TOTAL SHARE
    MR B HOLDS 50% OF TOTAL SHARE

    MR A & MR B ARE BROTHER

    1) MR A & MR B REQUIRE TO SUBMIT BEN 1 WITH ABC P LTD

    2) MR A & MR B ARE NATURAL PERSON, COMPANY NEEDS TO FILE BEN-2 FORM WITH ROC

      1. Neeraj Bhagat & Co. says:

        Yes, its absolutely correct, the Individual shareholders are not required to give BEN 1 and accordingly the Company who is having only individual shareholders is out of the Purview of the SBO Rules, 2019.

  9. ujjwal says:

    can anyone help me in getting PDF of Form BEN-1 in which the SBO has to give declaration. Or i can use a word document for that?

    Thanks in advance.

    1. Neeraj Bhagat & Co. says:

      Ujjawal you can use either pdf format or even a word format whichever available with you but do keep in mind that the format of form BEN 1 shall be as same as prescribed under law.

  10. Divya says:

    In the following situation, please help in identifying SBO-
    “A Pvt. Ltd. having 2 shareholders- Mr. B (25%), C Pte Ltd. (Foreign company holding 65%). Now there are 2 individual shareholders in company C Pte Ltd.- Mr. D & Mr. E, both holding 50 % each in Company C Pte Ltd.

    Whether this form Ben 2 applicable on reporting company A Pvt. Ltd.?

    1. Neeraj Bhagat & Co. says:

      Mr. D and Mr. E, the shareholders of C Pte Ltd. (Foreign Company) shall have to give form BEN 1 to A Pvt. Ltd. as there are both the shareholders holding equal proportion of the shares in C Pte Ltd. so in such a situation they both are the majority shareholders (even holding shares in equal proportion) so they both have to give form BEN 1 to A Pvt. Ltd.

  11. garima says:

    A pvt ltd has 6 Shareholders in total. (2 being DIRECTORS themselves having 19% & 32% shareholding, 2 are WIVES of Directors holding 7% & 5% Shares & B pvt ltd & C pvt ltd holding 18% & 19% shares of A pvt ltd respectively) .

    What will be the number of Members through whom indirect holding or right in
    reporting company is being exercised?

    Kindly Advice as to BEN1 also.

    1. Neeraj Bhagat & Co. says:

      Form BEN 1 shall be obtained by the individual shareholders holding majority shares of B Pvt. ltd and C Pvt. Ltd respectively.
      Further, there is no maximum no. of members criteria for the Indirect holding/right, it could be 2 or it could be 10 as well so no specific number has been prescribed by the law in such regards.

    2. garima says:

      In my Case, If both Private Companies B pvt ltd & C pvt ltd having 18% & 19% shareholding have further shareholding as follows:
      1) In B Ltd, 49.98% shares are held by a D pvt ltd & 49.98% by E pvt ltd & Others are small shareholders.
      2) In C ltd, 45.43% shares are held by a F pvt ltd & 45.43% Shares by G pvt Ltd. which is majority & others are small shareholders.

      Will this be considered majority?
      BEN 1 Will be required?

      1. Neeraj Bhagat & Co. says:

        In the instant case, the information of majority shareholders of D Pvt Ltd, E Pvt Ltd, F Pvt. Ltd. and G Pvt. Ltd. has to be reported in form BEN 2.

  12. Dhaval Patel says:

    Dear Mam,

    While Considering the Majority Stake, it is required to Considered Individual Holding Only or, Individual + PACs with Individual also need to be considered??

    1. Neeraj Bhagat & Co. says:

      While considering the Majority Stake, Individual + Persons acting in concert shall be taken into account. The persons acting in concert means the persons having the common intention behind such acts

    1. divya says:

      A pvt. ltd’s shareholders are B Pte. Ltd. (foreign body corporate) holding 99.99% and one indivual holding 0.01%. Now B Pte Ltd.’s shareholder is C Pte ltd. (foreign body corporate) holding 100 % of B Pte Ltd. There are 3 individual shareholders of C pte ltd. holding 65%, 25% and 10 % respectively. In this case, 3 individual shreholders will give BEN-1 to A pvt. Ltd.?

      1. Neeraj Bhagat & Co. says:

        The persons holding 65% of shares (majority stake) in C PTE LTD shall have to give BEN 1 to Reporting Company A Pvt. Ltd

        1. divya says:

          Thanks for your response. But law says whosoever is holding 10% or more, so why only the shareholder holding 65% shall give the declaration. Can you pls clarify.

          1. Neeraj Bhagat & Co. says:

            As per Explanation III of the Companies (Significant Beneficial Owners) Amendment Rules, 2019, where the member of the reporting company is a body corporate (whether incorporated or registered in India or abroad), other than a limited liability partnership, and the individual,–– holds majority stake in that member shall require to given BEN 1 to the Reporting Company.

            So that’s how it is concluded that the person who is holding majority shares (65% shares) in reporting company is liable to give BEN 1.

    1. Neeraj Bhagat & Co. says:

      While considering the Majority Stake, Individual + Persons acting in concert shall be taken into account. The persons acting in concert means the persons having the common intention behind such acts

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